Churches and non-profit organizations are calling for the repeal of a provision in the GOP's tax cuts law that would force ministries to file federal tax returns, and in some cases pay taxes.
Last winter, as lawmakers touted the tax savings in the Tax Cuts and Jobs Acts, no one mentioned this new federal tax on local churches. But for non-profits like Christian ministries, that little-known provision in the legislation has become a big cause for concern.
The six-month-old tax law could even force some churches to file state income tax returns and pay state taxes as well.
Under the new tax plan, churches, hospitals, colleges and other historically tax-exempt groups must pay a 21 percent tax on some benefits they provide their employees, such as parking, transportation and other related benefits.
Dan Busby is president of the Evangelical Council for Financial Accountability. He says churches weren't expecting to get hit with – of all things – an income tax bill, and this one could be a huge burden on groups that have historically enjoyed tax-exempt status.
"There are nearly 15 million employees that work in the United States for nonprofits – nearly 10 percent of the workforce – so that's 15 million parking places. And conservatively, it's going to cost the non-profit community as a whole up to a billion dollars," Busby said.
That's a lot of money for ministries that rely on donations. In response to the news, the ECFA put out a petition that churches and nonprofits can sign to protest the employee parking tax.
"Tax practitioners who have evaluated Section 512(a) (7) generally believe that the result of this new provision is that tax‐exempt organizations that provide parking to their employees will be subject to unrelated business income tax on the cost of the parking provided. A nonprofit organization that simply allows its employees to park in a parking lot or garage that is part of the organization's facilities will be subject to a tax on the cost of the parking provided," the ECFA explained in a position statement available for download on its website.
So how much does a parking space cost? The IRS is still calculating it. But Busby predicts it will cost non-profits even more money than the actual tax amount because some will have to hire accountants just to sort through the new requirement.
"Because of this new tax, many tax‐exempt employers, including churches, hospitals, charities, and schools will be required to file federal Form 990‐T, and in many cases, state corporate income returns, every year regardless of whether they actually engage in any unrelated business activity. This new tax was purportedly added to the law to put tax‐exempt employers on the same footing as taxable employers with respect to employer‐provided parking," the ECFA states.
The law will reportedly apply to all churches that provide parking for their employees even if the employee isn't charged for parking.
At least 1,000 churches and other non-profit groups have reportedly signed the petition demanding the tax be repealed. And legislation to remove the tax is now before the House Ways and Means Committee.
Meanwhile secular humanists are applauding the added taxes on churches.
"This is good news," reads an article on the Progressive Secular Humanist website. "Churches should be taxed... It's long past time to start taxing churches."
The ECFA says by signing the petition, "You will be advocating for the repeal of this new burdensome provision in the law...either by legislation or effectively by action of the Treasury Department. The position statement may be used to communicate these concerns to members of Congress and/or Treasury officials."